CURTIS W. BOYLES, INDIVIDUALLY AND D/B/A PACE OIL & GAS COMPANY v. EXXON CORPORATION, AND EXXON TEXAS, INC., AS SUCCESSOR IN INTEREST TO HUMBLE OIL & REFINING CO.--Appeal from 24th District Court of Refugio County

NUMBER 13-01-689-CV

COURT OF APPEALS

THIRTEENTH DISTRICT OF TEXAS

CORPUS CHRISTI EDINBURG

CURTIS W. BOYLES, INDIVIDUALLY AND D/B/A

PACE OIL AND GAS COMPANY, Appellants,

v.

EXXON CORPORATION, AND EXXON TEXAS,

INC., AS SUCCESSOR IN INTEREST TO

HUMBLE OIL AND REFINING CO., Appellees.

On appeal from the 24th District Court

of Refugio County, Texas.

M E M O R A N D U M O P I N I O N

Before Chief Justice Valdez and Justices Rodriguez and Dorsey //

Opinion by Chief Justice Valdez

Curtis W. Boyles, individually and doing business as Pace Oil & Gas Company ( Boyles ), sued Exxon Corporation and Exxon Texas, Inc., as successor in interest to Humble Oil & Refining Company ( Exxon ), for, inter alia, fraud, tortious interference with economic opportunities, and breach of various regulatory laws. Boyles alleged that Exxon s wrongful conduct caused damage to the value of Boyles s overriding royalty interest on an oil and gas lease in Refugio County, Texas. The trial court granted a partial summary judgment in favor of Exxon and severed the judgment. Boyles attacks this summary judgment by three issues. We affirm.

Factual and Procedural Background

During the 1950s and subsequently, Exxon held the oil and gas leases on several thousand acres of land owned by Mary Ellen and Thomas James O Connor in Refugio County, Texas (the O Connor Tract ). This tract possessed multiple producing zones with extended commercially viable hydrocarbon production.

Exxon began development of this tract and another contiguous tract sharing a common series of reservoirs, held under a separate mineral lease, almost contemporaneously. The royalty obligations for the O Connor tract were more onerous than those for the contiguous tract and Exxon tried but failed to renegotiate a more favorable royalty obligation for the O Connor land. Exxon began plugging and abandoning the wells on the O Connor tract while continuing to work and develop the contiguous tract. By 1991, Exxon s leases on the O Connor tract had terminated.

In March and April of 1993, Pace West Production, Ltd., lessee, entered an oil and gas lease and security agreement with Molly Louise Miesch Allen and others regarding portions of the O Connor tract. In the course of various conveyances associated with the lease, Boyles acquired an overriding royalty interest // and Emerald Oil & Gas L.C. ( Emerald ) acquired the working interest // in the lease. Boyles sold the override to Saglio Partnership, Ltd. on or about June 1, 1995, for the sum of $550,000.00.

In 1996, in cause number 96-7-8148 in the 135th Judicial District Court of Refugio County, the lessor royalty interest owners and Emerald brought suit against Exxon alleging that Exxon intentionally sabotaged the wells on the O Connor tract by leaving refuse, parted casing, cut casing, plugs, and obstructions in the wells and pumping tank bottom sand and other contaminants into the wells, thereby damaging the reservoir and committing waste. The plaintiffs argued that Exxon attempted to inhibit or destroy any future possibility of redevelopment of the oil and gas reserves underlying the O Connor tract. The jury found that Exxon maliciously committed waste, breached its contractual duty to prosecute diligently a continuous drilling and development program until said tract is fully developed for oil and gas, and fraudulently concealed its failure to develop the tract. The trial court granted a directed verdict against Emerald but rendered judgment on the verdict and awarded the property owners $8,600,000 in actual damages, $10,000,000 in punitive damages, and $2,795,000 in prejudgment interest. //

On or around January 10, 2000, Boyles was informed of the jury s findings and the trial court s judgment in cause number 96-7-8148 and thus learned of Exxon s alleged wrongful conduct regarding the O Connor Tract. Boyles filed suit against Exxon on April 7, 2000 for damage to the value of his overriding royalty interest alleging causes of action for breach of the regulatory law duty to properly plug a well, breach of a regulatory law duty in committing waste, tortious interference with economic opportunity, fraud, and loss of value to the override due to improper plugging.

Exxon moved for summary judgment on both traditional and no evidence grounds. Exxon argued that it was entitled to a traditional take-nothing summary judgment because (1) even if all of Boyles s causes of action exist, each is barred by limitations; (2) there is no private cause of action for breach of a regulatory law duty to plug a well in a particular fashion; and (3) there is no private cause of action for breach of any regulatory law duty not to commit waste. Exxon argued that it was entitled to a no evidence summary judgment on Boyles s tortious interference claims because there is no evidence that Boyles and any third party had any existing or prospective contract with which Exxon could have interfered when it plugged its wells, and there is no evidence that Exxon intended to interfere with any interest belonging to Boyles when it plugged its wells.

The trial court granted Exxon s motion for summary judgment regarding Boyles s claims for (1) breach of a regulatory duty to properly plug a well, (2) breach of a regulatory law duty to not commit waste, and (3) tortious interference with economic opportunity, but denied the summary judgment regarding Boyles s remaining claims of fraud and loss of value to the override. The court then severed the summary judgment and this appeal ensued.

In three issues, Boyles contends that the trial court erred in granting summary judgment on his cause of action for breach of the regulatory law duties prohibiting waste, the breach of the regulatory law duty to properly plug a well, and his claim for tortious interference with economic opportunity.

Standard of Review

The function of a summary judgment is to eliminate patently unmeritorious claims and untenable defenses. Gulbenkian v. Penn, 252 S.W.2d 929, 931 (Tex. 1952); Oasis Oil Corp. v. Koch Ref. Co., 60 S.W.3d 248, 251 (Tex. App. Corpus Christi 2001, pet. denied). The Texas Supreme Court has established that the movant for summary judgment has the burden of showing that (1) there is no genuine issue of material fact and that it is entitled to judgment as a matter of law; (2) in deciding whether there is a disputed material fact issue precluding summary judgment, evidence favorable to the nonmovant will be taken as true; and (3) every reasonable inference must be indulged in favor of the nonmovant and any doubts resolved in its favor. Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548-49 (Tex. 1985); Oasis Oil Corp., 60 S.W.3d at 252.

The summary judgment movant must establish its entitlement to summary judgment as a matter of law. Oasis Oil Corp., 60 S.W.3d at 252; Clark v. First Nat'l Bank of Highlands, 794 S.W.2d 953, 955 (Tex. App. Houston [1st Dist.] 1990, no writ)); see also Tex. R. Civ. P. 166a(c). The defendant as movant must either conclusively negate an element from the plaintiff's causes of action or conclusively establish every element of an affirmative defense. Gibbs v. General Motors Corp., 450 S.W.2d 827, 828 (Tex. 1970); Richard v. Reynolds Metal Co., 108 S.W.3d 908, 909 (Tex. App. Corpus Christi 2003, no pet.). In response, the plaintiff can bar summary judgment by presenting evidence that creates a fact question on the challenged elements of the plaintiff's case or by showing that the defendant's legal position is unsound. Puga v. Donna Fruit Co., 634 S.W.2d 677, 680-81 (Tex. 1982); Oasis Oil Corp., 60 S.W.3d at 252.

When a motion for summary judgment is based on no-evidence grounds, the Texas Supreme Court has ordered that the courts must apply these rules in light of the following additional caveats:

1.the no-evidence motion can only be brought against a claim or defense on which an adverse party would have the burden of proof at trial, Tex. R. Civ. P. 166a(i);

2. the motion must state the elements as to which there is no evidence, Id.;

3. the motion must be specific in challenging the evidentiary support for an element of a claim, Tex. R. Civ. P. 166a cmt.;

4. paragraph (i) does not authorize conclusory motions or general no-evidence challenges to an opponent s case, Id.;

5.the response need only point out evidence that raises a fact issue on the challenged elements, Id.; and

6. the respondent is not required to marshal its proof. Id.

Oasis Oil Corp., 60 S.W.3d at 252. The trial court may not grant a no-evidence summary judgment if the respondent brings forth more than a scintilla of probative evidence to raise a genuine issue of material fact. Zapata v. The Children s Clinic, 997 S.W.2d 745, 747 (Tex. App. Corpus Christi 1999, no pet.).

Limitations

On appeal, we review all of the summary judgment grounds on which the trial court actually ruled, whether granted or denied, and which are dispositive of the appeal, and may consider any grounds on which the trial court did not rule. Baker Hughes, Inc. v. Keco R&D, Inc., 12 S.W.3d 1, 6 (Tex. 1999). The trial court denied Exxon s motion for summary judgment based on the relevant statutes of limitation. However, given that this issue is dispositive of this appeal, we begin our analysis here.

Boyles initially filed suit in April 2000. He asserts that his claims were timely filed based on the discovery rule and fraudulent concealment. Exxon argues that Boyles s claims for breaches of regulatory law duties are governed by a four year statute of limitations under Texas Civil Practice & Remedies Code section 16.051 (Vernon 1997), and Boyles s claim for tortious interference is governed by a two year statute of limitations. Harrison v. Bell, 99 S.W.3d 163, 167 (Tex. App. Corpus Christi 2002, no pet.); see Tex. Civ. Prac. & Rem. Code Ann. 16.003(a) (Vernon 2002). According to Exxon, it had completed plugging its wells by August 16, 1991, and because Boyles did not file suit by August 15, 1993, or August 15, 1995, his claims were barred by limitations. Exxon contends that fraudulent concealment and the discovery rule do not operate to save Boyles s causes of action because Boyles failed to use reasonable diligence to discover his causes of action.

A defendant moving for summary judgment on the affirmative defense of limitations has the burden to conclusively establish that defense. KPMG Peat Marwick v. Harrison County Housing Fin. Corp., 988 S.W.2d 746, 748 (Tex. 1999). Thus, the defendant must (1) conclusively prove when the cause of action accrued, and (2) negate the discovery rule, if it applies and has been pleaded or otherwise raised, by proving as a matter of law that there is no genuine issue of material fact about when the plaintiff discovered, or in the exercise of reasonable diligence, should have discovered the nature of its injury. Id.; see Janis v. Melvin Simon Associates, Inc., 2 S.W.3d 647, 650 (Tex. App. Corpus Christi 1999, pet. denied).

The discovery rule operates to defer accrual of a cause of action until the plaintiff knows, or, by exercising reasonable diligence, should know of the facts giving rise to the claim. Wagner & Brown, Ltd. v. Horwood, 58 S.W.3d 732, 736 (Tex. 2001). The discovery rule provides that limitations run from the date the plaintiff discovers or should have discovered, in the exercise of reasonable care and diligence, the nature of the injury. See Childs v. Haussecker, 974 S.W.2d 31, 40 (Tex. 1998). Discovering the nature of the injury requires knowledge of the wrongful act and the resulting injury. See id.

The discovery rule is a very limited exception to statutes of limitations, available only when the nature of the plaintiff s injury is both inherently undiscoverable and objectively verifiable. Computer Assocs. Int l, Inc. v. Altai, Inc., 918 S.W.2d 453, 455 (Tex. 1996). In determining whether an injury is inherently undiscoverable, we do not examine whether the particular plaintiff was able to discover the injury; rather, we determine whether an injury is inherently undiscoverable on a categorical basis. Apex Towing Co. v. Tolin, 41 S.W.3d 118, 122 (Tex. 2001). Thus, we do not determine whether Boyles could have discovered his injury within the limitations period, but instead decide whether the injury alleged by Boyles is the type of injury that generally is discoverable by the exercise of reasonable diligence. HECI Exploration Co. v. Neel, 892 S.W.2d 881, 886 (Tex. 1998).

Inquiries involving the discovery rule usually entail questions for the trier of fact. Childs, 974 S.W.2d at 44. However, the commencement of the limitations period may be determined as a matter of law if reasonable minds could not differ about the conclusion to be drawn from the facts in the record. Id.

The discovery rule and fraudulent concealment are distinct concepts that exist for different reasons. See Wagner & Brown, Ltd., 58 S.W.3d at 736. The fraudulent concealment doctrine resembles equitable estoppel. Id. Proof of fraudulent concealment suspends the running of limitations until such time as the plaintiff learned of, or should have discovered, the deceitful conduct or the facts giving rise to the cause of action. Earle v. Ratliff, 998 S.W.2d 882, 888 (Tex. 1999). In other words, fraudulent concealment will toll limitations until the plaintiff discovers the fraud or could have discovered the fraud with reasonable diligence. Shah v. Moss, 67 S.W.3d 836, 841 (Tex. 2001). Accrual of the cause of action is deferred because a person cannot be permitted to avoid liability for his actions by deceitfully concealing wrongdoing until limitations has run. S.V. v. R.V., 933 S.W.2d 1, 7 (Tex. 1996). Fraudulent concealment may be shown by direct or circumstantial evidence. Id.

A party asserting fraudulent concealment as an affirmative defense to the statute of limitations has the burden to raise it in response to the summary judgment motion and to come forward with summary judgment evidence raising a fact issue on each element of the fraudulent concealment defense. KPMG Peat Marwick, 988 S.W.2d at 749. The elements of fraudulent concealment are: (1) the existence of the underlying tort; (2) the defendant's knowledge of the tort; (3) the defendant's use of deception to conceal the tort; and (4) the plaintiff's reasonable reliance on the deception. Mitchell Energy Corp. v. Bartlett, 958 S.W.2d 430, 439 (Tex. App. Fort Worth 1997, pet. denied).

Both the discovery rule and fraudulent concealment require the plaintiff to use diligence in discovering its injury. See S.V., 933 S.W.2d at 6 (discovery rule); Casey v. Methodist Hosp., 907 S.W.2d 898, 903 (Tex. App. Houston [1st Dist.] 1995, no writ) (fraudulent concealment).

According to Boyles s summary judgment evidence, Boyles acquired his overriding royalty interest from the landowners in 1993 and sold these interests on June 1, 1995, for the sum of $550,000. Boyles first heard about the Emerald Oil litigation and first discovered that Exxon had sabotaged the wells, on or about January 10, 2000 and filed suit several months thereafter. Boyles testified that, prior to that date, he had no knowledge of the property owners claims, Emerald s claims, or Exxon s false filings with the railroad commission. According to Boyles s affidavit, before he sold the override in 1995, the only knowledge of Emerald s reentry and reworking operations in the boreholes of wells was through one or more telephone conversations wherein Tommy Yokem of Emerald informed him that Emerald had encountered difficulties in reentering [two or three] of the Exxon/O Connor Wells. According to Boyles, of the wells that they had reentered, they had multiple problems. Boyles also acknowledged hearing of reentry problems from his engineer partner, various people in Refugio, and Arnie Cardona.

Boyles was present at the first reentry, and saw Parted casing, I believe, shifted casing; cuts I think cuts not being where they were supposed to be. Boyles discussed these problems with others on location: Why things were happening the way they were happening; what s causing this; why is it causing that. Well, I think this and I think that.

Boyles did not have direct communications with anyone at Emerald regarding lease operations during the time he owned the override. Boyles did not inquire about the size of his royalty payments because it was fruitless to do that, and he could monitor at the Railroad Commission what they were doing. Boyles testified that he was not necessarily satisfied at the reentry results, but did not question Emerald as to its procedures or operations

Boyles testified that he sold his override because the owners of the Saglio ownership wanted me out of the override. They made me an offer, and based on the problems that I saw and the instability of what was going on, I sold my interest back to Saglio for what I consider a reduced value. Boyles testified that, following the sale, he was neither contacted by any party regarding the wells nor did he have any subsequent communications with any party to the sale until on or about January 10, 2000 when he was informed of the existence of the related litigation.

Assuming, without deciding, that the discovery rule applies in this case, we conclude that Boyles s own testimony establishes that he, in the exercise of reasonable care and diligence, should have discovered his injury in 1995, that is, more than four years prior to the date that he filed suit. Boyles s testimony shows that by 1995, a representative from Emerald had informed him that Emerald had encountered difficulties in reentering two or three of the Exxon/O Connor Wells, and that various people in Refugio told him that Saglio had problems reentering the wells, as had his engineer partner. Boyles was present at the first reentry, and knew at that time that the reentry was difficult due to parted casing, shifted casing, and cuts not being where they were supposed to be. During the reentry process, Boyles specifically discussed potential causes for the problems with Emerald s personnel. Boyles s own testimony affirmatively establishes his experience and expertise in oil and gas production. Nevertheless, Boyles could have, but did not, examine the filings with the railroad commission, nor did he ask about the royalty amounts he was receiving under his agreement with Emerald. Instead, the evidence establishes that Boyles sold his override at a reduced value based on problems and instability that he saw in the reentry process.

In avoidance of limitations, Boyles argues at trial and on appeal that he was not aware of the related litigation until January 2000. However, the issue is not when he learned of the related lawsuit, but when he knew of facts, conditions, or circumstances that would cause a reasonable person to make inquiry leading to the discovery of his cause of action. See Borderlon v. Peck, 661 S.W.2d 907, 909 (Tex. 1983).

Our analysis and conclusion is no different regarding Boyles s claim that Exxon fraudulently concealed his cause of action. In other words, as with the discovery rule, Boyles could have discovered the alleged fraud with reasonable diligence. Shah, 67 S.W.3d at 841. This is, in the law, equivalent to knowledge of the cause of action for limitations purposes. Mitchell Energy Corp., 958 S.W.2d at 439.

Conclusion

In sum, reasonable minds could not differ about when Boyles knew or should have known of facts that in the exercise of reasonable diligence would have led to the discovery of his injury. Childs, 974 S.W.2d at 46. Accordingly, the judgment of the trial court is affirmed.

Rogelio Valdez,

Chief Justice

Memorandum Opinion delivered and filed

this 10th day of February, 2005.